U.S. military searches for balloon remnants as China urges restraint

BEIJING/WASHINGTON (Reuters) - The U.S. military said on Sunday it is searching for remnants of the suspected Chinese surveillance balloon it shot down a day earlier, while Beijing on Monday urged Washington not to escalate or take further action to harm its interests.

The drama over the balloon, which Beijing again reiterated is a civilian airship that accidentally strayed into U.S. airspace, has further strained already-tense relations and led Washington to cancel a planned visit to Beijing by Secretary of State Antony Blinken.

The U.S. Navy is working to recover the balloon and its payload and the Coast Guard is providing security for the operation, General Glen VanHerck, commander of the North American Aerospace Defense Command and U.S. Northern Command, said on Sunday.

A successful recovery could potentially give the United States insight into China's spying capabilities, though U.S. officials have downplayed the balloon's impact on national security.

A U.S. fighter jet shot down the balloon in the Atlantic off South Carolina on Saturday, a response China described as an "obvious overreaction".

"China firmly opposes and strongly protests against this," China's Vice Foreign Minister Xie Feng said in remarks to the U.S. embassy in Beijing that were posted on the ministry's website on Monday morning.

"The Chinese government is closely following the development of the situation," he said.

The balloon incident comes as the United States and China had sought to bolster communications and begin to mend ties that had been under severe strain in recent years over tensions on several fronts, including U.S. efforts to block Chinese access to key cutting-edge technologies.

China has warned of "serious repercussions" and said it will use the necessary means to deal with "similar situations", without elaborating, although some analysts said they expect any response to be finely calibrated to keep from making bilateral ties even worse.

Brokerage ING said in a Monday note that the incident could exacerbate the "tech war" and would have negative near-term impact on China's yuan currency.

"Both sides will likely impose more export bans on technology in different industries. This is a new threat to supply chain disruption, although the risk of logistical disruption from Covid restrictions has now disappeared," it said.

"This new risk is more of a long-term risk than an imminent one," ING said.

China's yuan fell to a low of 6.8077 per dollar in early Monday trading, touching the weakest level in nearly a month.

(Reporting by David Lawder, Kanishka Singh, Gram Slattery and Andy Sullivan in Washington and Bernard Orr and Tony Munroe in Beijing; Editing by Michael Perry)

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